UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10–Q





(Mark One)


xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the quarterly period ended March 31, 2011





oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the transition period from ___________ to _____________





Commission File Number: 000-53208





SINO GREEN LAND CORPORATION


(Exact Name of Registrant as Specified in Its Charter)





Nevada

54-0484915(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)





Suite 2711A, 27/F, Exchange Tower,


33 Wang Chiu Road, Kowloon Bay,


Kowloon, Hong Kong


People's Republic of China


(Address of principal executive offices, Zip Code)





+852-3104-0598


(Registrant's telephone number, including area code)





_____________________________________________________


(Former name, former address and former fiscal year, if changed since last report)





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


Yes x No o





Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).


Yeso No o





Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.





Large accelerated filer o
Accelerated filer oNon-accelerated filer o
Smaller reporting company x(Do not check if a smaller reporting company)





Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).





Yes o No o





The number of shares outstanding of each of the issuer's classes of common stock, as of May 13, 2011 is as follows:





Class of Securities

Shares OutstandingCommon Stock, $0.001 par value

213,512,924














TABLE OF CONTENTS





PART IFINANCIAL INFORMATIONITEM 1.
FINANCIAL STATEMENTS
2Consolidated Unaudited Balance Sheets as of March 31, 2011 and December 31, 2010
2Unaudited Consolidated Statements of Income and Other Comprehensive Income for the Three Months Ended March 31, 2011 and 2010
3Unaudited Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2011  and 2010
4Notes to Unaudited Consolidated Financial Statements
5ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
19ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
29ITEM 4.
CONTROLS AND PROCEDURES
29PART IIOTHER INFORMATIONITEM 6.
EXHIBITS.
30








1




SINO GREEN LAND CORPORATION AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS

UNAUDITED





MARCH 31, 2011

DECEMBER 31, 2010ASSETSCurrent AssetsCash and cash equivalents

$
958,120


$
925,329Accounts receivable, net


244,907



261,403Inventories


53,967



8,684Advances-current portion


772,711



-Other current assets


221,240



114,026Total Current Assets


2,250,945



1,309,442Property and Equipment, net


6,237,122



6,238,784Intangible Assets, net


19,291,249



9,515,732Deposit


491,012



487,916Advances


8,678,165



4,816,467Long-term Prepayments


21,829,564



21,955,769Total Assets

$
58,778,057


$
44,324,110LIABILITIES AND SHAREHOLDERS' EQUITYCurrent LiabilitiesAccounts payable and accrued expenses

$
3,116,826


$
2,719,724Advances from customers


-



15,125Due to related parties


18,065



120,840Shares to be issued as stock compensation


486,217



384,817Shares to be issued


70,000



70,000Derivative liability


431,785



908,142Total Current Liabilities


4,122,894



4,218,648Shareholders' EquityPreferred stock, par value $.001 per share, 20,000,000 shares authorized, of which 2,000,000 shares are designated as series A convertible preferred stock, with 1,259,858 and 1,409,858 shares outstanding on March 31, 2011 and December 31, 2010, respectively


1,260



1,410Common stock, $0.001 par value, 780,000,000 shares authorized, 213,512,924 and 157,793,840 issued and outstanding as of March 31, 2011 and December 31, 2010, respectively


213,513



157,794Additional paid in capital


31,963,310



19,438,509Other comprehensive income


2,163,558



1,883,058Retained earnings


20,313,523



18,624,692Total shareholders' equity


54,655,164



40,105,462Total Liabilities and Stockholders' Equity

$
58,778,057


$
44,324,110





The accompanying notes are integral part of these unaudited consolidated financial statements.


2





SINO GREEN LAND CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOMEFOR THE THREE MONTHS ENDED MARCH 31, 2011 AND 2010(UNAUDITED)





THREE MONTHS ENDEDMARCH 31,2011


2010

RestatedSales

$
41,233,897


$
33,555,804Cost of goods sold


36,795,972



29,919,804Gross profit


4,437,925



3,636,000Operating expensesSelling expenses


1,026,857



792,180General and administrative expenses


1,612,206



442,737Salary and Wages


263,955



208,396Stock Compensation


312,000



3,625Total operating expenses


3,215,018



1,446,938Operating income


1,222,907



2,189,061Other income(expense)Interest income (expense)


396



1,606Change in derivative liability


476,356



(2,272,481)Others, net


(10,828)



(2,370)Total other income (expense)


465,924



(2,273,245)Net income


1,688,831



(84,183)Deemed preferred stock dividend


-



(350,000)Net income applicable to common stockholders


1,688,831



(434,183)Comprehensive income:Net income


1,688,831



(84,183)Other comprehensive income (loss)Foreign currency translation gain (loss)


280,500



(3,729)Comprehensive income

$
1,969,331


$
(87,912)Net income per shareBasic

$
0.01


$
(0.00)Diluted

$
0.01


$
(0.00)Weighted average number of shares outstandingBasic


196,336,084



109,193,511Diluted


216,845,606



144,961,005





The accompanying notes are integral part of these unaudited consolidated financial statements.





3




SINO GREEN LAND CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE THREE MONTHS ENDED MARCH 31, 2011 AND 2010(UNAUDITED)





MARCH 31,2011



2010

RestatedCash flows from operating activitiesNet income

$
1,688,831



$
(84,183
)Adjustments to reconcile net income to net cash used in operating activitiesDepreciation


29,781




20,638Amortization


554,206




222,312Change in derivative liability


(476,356
)



2,272,481Stock compensation


312,000




3,613Decrease / (Increase) in current assetsAccounts receivable


18,155




(85,861
)Other receivable


(44,650
)Inventories


(45,227
)



9,935Other current assets


(769,615
)



706,326Deposit


(3,096
)Advances


-




(1,273,256
)Long-term prepaid expense


10,498




(3,291,384
)Increase (decrease) in current liabilitiesAccounts payable and accrued expense


(574,537
)



(43,310
)Advances from customer


(15,220
)Tax payables


63,915




690Other payables


892,896




155,729Net cash used in operating activities


1,641,578




(1,386,270
)Cash flows from investing activitiesAcquisition of property and equipment


10,272




(1,520
)Acquisition of intangible assets


(3,831,128
)Net cash used in investing activities


(3,820,856
)



(1,520
)Cash flows from financing activitiesProceeds from sale of preferred stock, warrants and options,  net of offering costs







350,000Proceeds from sale of common stock and warrants, net of offering cost


2,366,000




780,040Proceeds from loan from related parties


(175,451
)



(14,180
)Net cash provided by financing activities


2,190,549




1,115,860Effect of exchange rate change on cash and cash equivalents


21,519




100,071Net (decrease) increase in cash and cash equivalents


32,791




(171,860
)Cash and cash equivalents, beginning balance


925,329




1,987,616Cash and cash equivalents, ending balance

$
958,120



$
1,815,756Supplement disclosure of cash flow informationInterest expense paid

$
-



$
-Income taxes paid

$
-



$
-Non-cash financing activities:Deemed dividend on preferred stock associated with its beneficial conversion feature






$
350,000Conversion of preferred stock into common stock

$
150,000



$
44,015Common stock issued for advance payment of building

$
10,003,771





The accompanying notes are integral part of these unaudited consolidated financial statements.





4




SINO GREEN LAND CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS





1. ORGANIZATION AND DESCRIPTION OF BUSINESS





Organization





Sino Green Land Corporation (the “Company”) was incorporated in Nevada in March 2008 under the name of Henry County Plywood Corporation, as the successor by merger to a Virginia corporation organized in May 1948 under the same name. On March 23, 2009, the Company’s corporate name was changed to Sino Green Land Corporation.





The Company, through its Chinese operating subsidiaries and a variable interest entity, is engaged in the wholesale distribution, marketing and sales of premium fruits in China.





On January 15, 2009, the Company entered into a share exchange agreement with Organic Region Group Limited (“Organic Region”), its stockholders and its wholly owned subsidiaries, Zhuhai Organic Region Modern Agriculture Ltd. (“Zhuhai Organic”), and Guangzhou Organic Region Agriculture Ltd. (“Guangzhou Organic”), Fuji Sunrise International Enterprises Limited (“Fuji Sunrise”), Southern International Develop Limited (“Southern International”) and HK Organic Region Limited (“HK Organic”). Pursuant to the share exchange agreement and a related agreement with the Company’s two former principal stockholders:





·
The Company issued to the former stockholders of Organic Region a total of 81,648,554 shares of common stock, constituting approximately 98% of its outstanding stock, in exchange for all of the capital stock of Organic Region; and





·
Our former majority stockholders sold to the Company 1,666,298 shares of common stock, representing 50% of the outstanding shares, for $500,000 non-interest bearing convertible promissory notes, which were paid in 2009. The Company has no further obligations to the former majority stockholders.





Prior to the closing of these transactions, the Company, then known as Henry County Plywood Corporation, was not engaged in any business activity.





The Company is the sole stockholder of Organic Region, a British Virgin Islands corporation which was incorporated on January 30, 2003. Organic Region is the sole stockholders of five limited liability companies organized under the laws of the People’s Republic of China, each of which is a wholly foreign-owned entity, known as a WFOE: Zhuhai Organic, Guangzhou Organic, Fuji Sunrise, Southern International, HK Organic, and Guangzhou Metro Green Trading Ltd. Guangzhou Metro Green Trading Ltd, wholly owned by Southern International, was formed on March 31, 2010 and is engaged in the wholesale distribution, marketing and sales of grocery products in China.





Under generally accepted accounting principles, the acquisition by the Company of Organic Region is equivalent to the acquisition by Organic Region of the Company, then known as Henry County Plywood Corporation, with the issuance of stock by Organic Region for the net monetary assets of the Company. This transaction is reflected as a recapitalization, and is accounted for as a change in capital structure. Accordingly, the accounting for the acquisition is identical to that resulting from a reverse acquisition. Under reverse acquisition accounting, the comparative historical financial statements of the Company, as the legal acquirer, are those of the accounting acquirer, Organic Region. The accompanying financial statements reflect the recapitalization of the stockholders’ equity as if the transactions occurred as of the beginning of the first period presented. Thus, only the 81,648,554 shares of common stock issued to the former Organic Region stockholders are deemed to be outstanding for all periods reported prior to the date of the reverse acquisition. As a result of the reverse acquisition effected by the share exchange agreement, the Company’s business has become the business of the Organic Region. The 1,666,297 shares of common stock that were outstanding on January 15, 2009, net of the 1,666,298 shares that were purchased by the Company and cancelled, are treated as if they were issued on January 15, 2009, as part of a recapitalization.





The Company has an exclusive agreement with Xiong Luo, who was, at the time the Company entered into the agreement, one of the Company’s senior executive officers and is now the chief executive officer. Mr. Luo is and the owner and holder of the business license for Guangzhou Greenland Co. Ltd. (“Guangzhou Greenland”). Pursuant to this agreement, Organic Region provides consulting services, including business operations, human resources and research and development services, to Mr. Luo with respect to Guangzhou Greenland to enable Guangzhou Greenland to operate the fruit trading business in China. In exchange for such services, Mr. Luo agreed to pay a consulting services fee to Organic Region equal to all of the revenues obtained by Guangzhou Greenland. The agreement gave the Company the ability to substantially influence Guangzhou Greenland’s daily operations and financial affairs, appoint its senior executives and approve all matters requiring stockholder approval. Mr. Luo also irrevocably granted the Company an exclusive option to purchase, to the extent permitted under PRC law, all or part of the equity interests in Guangzhou Greenland and agreed to entrust all the rights to exercise voting power to the person appointed by the Company. Guangzhou Greenland is considered a variable interest entity, and its financial statements are included in our consolidated financial statements. Substantially all of the Company’s revenue is derived from the business of Guangzhou Greenland.





5





2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Principles of consolidation





The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Zhuhai Organic and Guangzhou Organic, Fuji Sunrise, HK Organic, Southern International, and Guangzhou Metro Green Trading Ltd, together with its 100% Variable Interest Entity (VIE), Guangzhou Greenland. All significant inter-company accounts and transactions have been eliminated in consolidation.





Variable interest entities (VIE) are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders lack adequate decision making ability. All VIEs with which the Company is involved must be evaluated to determine the primary beneficiary of the risks and rewards of the VIE. The primary beneficiary is required to consolidate the VIE for financial reporting purposes.





On January 1, 2005, Organic Region entered into exclusive arrangements with Mr. Xiong Luo, who was then the Company’s chief operating officer and has since become the Company’s chief executive officer and president, and who holds the business license for Guangzhou Greenland, that give the Company the ability to substantially influence Guangzhou Greenland’s daily operations and financial affairs, appoint its senior executives and approve all matters requiring stockholder approval. As a result, the Company consolidates the financial results of Guangzhou Greenland as variable interest entity pursuant to ASC 810.





a.
Guangzhou Greenland holds the licenses necessary to operate its fruit trading business in China.





b.
The Company has the exclusive right to purchase the fruit and vegetables from and it provides other general business operation services to Guangzhou Greenland in return for a consulting services fee which is equal to Guangzhou Greenland’s revenue.





c.
Mr. Luo irrevocably granted the Company an exclusive option to purchase, to the extent permitted under PRC law, all or part of the equity interests in Guangzhou Greenland and agreed to entrust all the rights to exercise his voting power to the person appointed by the Company.





Use of estimates





The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the amount of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. However, actual results could differ materially from those results.





Cash and cash equivalents





The Company considers all cash on hand and in banks, including accounts in book overdraft positions, certificates of deposit and other highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents.





Accounts receivable





The Company’s policy is to maintain reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. As of March 31, 2011 and December 31, 2010, the Company had accounts receivable, of $244,907 and $261,403, net of allowance for bad debts in the amount of $9,620 and $9,559, respectively.





Other current assets





Other current assets as of March 31, 2011 and December 31, 2010 were valued at $221,240 and $114,026 respectively. The other current assets mainly comprise of advances to employees and a deposit to an unrelated party in the PRC.





6




Advances





As of March 31, 2011, advances of the Company amounted to $9,450,876, of which $131,074 represents advance payment to an unrelated party for Guangzhou Metro Green’s farm reconstruction, $772,711 represents advance payment to two unrelated parties for sales and marketing and advertisement, and 40,015,084 shares of the Company’s common stock represents advance payments to several unrelated parties for the interior construction and equipment of the building for the Company’s proposed distribution hub (MetroGreen). See Note 4.


As of December 31, 2010, advances of the Company amounted to $4,816,467, of which $112,929 represents advance payment to an unrelated party for Guangzhou Metro Green’s farm reconstruction and $4,703,538 represents advance payments to several unrelated parties for the decoration and equipment of the building for the Company’s proposed distribution hub (MetroGreen).





Deposit





As of March 31, 2011 and December 31, 2010, the Company had lease deposits in the amounts of $491,012 and $487,916, respectively, of which $380,512 and $378,112 were the deposit related to the lease for the Company’s distribution warehouse (MetroGreen) and as of March 31, 2011 and December 31, respectively. $110,500 and $109,804 was the deposit related to the lease of a cold storage facility as of March 31, 2011 and December 31, respectively. The deposits were paid to unrelated parties and are refundable after the expiration of the term of the lease.





Inventories





Inventories are valued at the lower of cost (determined on a weighted average basis) or market value. Management compares the cost of inventories with market value and an allowance is provided to reduce the value of inventories to their net market value. Inventories consisted of produce in the amount of $53,967 and $8,684 as of March 31, 2011 and December 31, 2010, respectively.





Property and equipment





Property and equipment are recorded at cost. Gains or losses on disposals are reflected as gain or loss in the year of disposal. The cost of improvements that extend the life of plant, property, and equipment are capitalized. These capitalized costs may include structural improvements, equipment, and fixtures. All ordinary repair and maintenance costs are expensed as incurred.





Depreciation for financial reporting purposes is provided using the straight-line method over the estimated useful lives of the assets: 20 years for building, 5 years for manufacturing machinery, 3 to 5 years for office equipment, and 5 years for motor vehicles.





Impairment





The Company reviews long-lived for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value.





The Company tests long-lived assets, including property, plant and equipment, for recoverability at least annually or more frequently upon the occurrence of an event or when circumstances indicate that the net carrying amount is greater than its fair value. Assets are grouped and evaluated at the lowest level for their identifiable cash flows that are largely independent of the cash flows of other groups of assets. The Company considers historical performance and future estimated results in its evaluation of potential impairment and then compares the carrying amount of the asset to the future estimated cash flows expected to result from the use of the asset. If the carrying amount of the asset exceeds estimated expected undiscounted future cash flows, the Company measures the amount of impairment by comparing the carrying amount of the asset to its fair value. The estimate of fair value is generally measured by discounting expected future cash flows as the rate the Company utilizes to evaluate potential investments. The Company estimates fair value based on the information available in making whatever estimates, judgments and projections are considered necessary. There was no impairment of long-lived assets for the year ended March 31, 2011 and December 31, 2010.





Derivative liability





The derivative liability represents the value of warrants to purchase common stock that were issued in connection with certain debt and preferred stock offerings in 2008 and 2009. The warrants are reported at fair value using the Black-Scholes model with changes in value reflected in earnings for the period.





7




Stock based compensation





Stock-based payment compensation to employees and consultants is based on the grant-date fair value of the equity instrument issued and recognized as compensation expense when issued unless the right to the shares vests over a period of time, in which case the compensation expense is recognized as the shares vest.  Stock-based compensation to directors is accrued ratably over the term of the applicable agreement. Please see Note 8.





Preferred Stock





On May 14, 2010, the certificate of designation relating to the series A preferred stock was amended and restated to increase the number of authorized shares of series A preferred stock from 1,000,000 to 2,000,000 shares. The financial statements at December 31, 2009 give retroactive effect to this amendment.





Deemed Preferred Stock Dividend





The Company records a deemed preferred stock dividend for the amortization of any discount arising from beneficial conversion features associated with its preferred shares. Upon issuance, this discount is offset by a credit to additional paid-in capital, and is generally amortized over its earliest conversion period. Due to the perpetual nature of the preferred stock and the immediate conversion rights, the full discount is reflected as a deemed preferred stock dividend upon issuance.





Revenue recognition





Sales revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are treated as unearned revenue and recorded as Advance from customers. Discounts provided to customers by the Company at the time of sale are recognized as a reduction in sales as the products are sold. Sales taxes are not recorded as a component of sales.





Cost of Goods Sold





Cost of goods sold includes produce costs and the amortization of the long-term leases on which the produce is grown and for which the full payment was made at the commencement of the lease. Discounts provided to the Company by vendors at the time of purchase are recognized as a reduction in inventory cost as the products are delivered.





All other costs, including warehousing costs, transportation costs, salaries, rent expense and depreciation expense, are shown separately in selling expense or general and administrative expense in the Consolidated Statements of Income.





Income taxes





The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.





The Company accounts for income taxes using an asset and liability approach which allows for the recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain.





The Company records a valuation allowance for deferred tax assets, if any, based on its estimates of its future taxable income as well as its tax planning strategies when it is more likely than not that a portion or all of its deferred tax assets will not be realized. If the Company is able to utilize more of its deferred tax assets than the net amount previously recorded when unanticipated events occur, an adjustment to deferred tax assets would increase the Company net income when those events occur. The Company does not have any significant deferred tax asset or liabilities in the PRC tax jurisdiction.





8





Interest income (expense)





The following table sets forth interest income and expense for the three months ended March 31, 2011 and 2010.





Three months period Ended

March 31,2011


2010Interest income

$
396


$
1,606Interest expense


0



0Interest income (expense) net

$
396


$
1,606





Earnings per share





Basic earnings per share is based upon the weighted average number of shares common stock outstanding. Diluted earnings per share is based on the assumption that all dilutive convertible shares and stock options and warrants were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.





Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. Potentially dilutive common shares consist of common stock issuable upon the conversion of the outstanding shares of Series A preferred stock (using the if-converted method) and common stock warrants (using the treasury stock method). The following table presents a reconciliation of basic and diluted earnings per share:





Three months period Ended

March 31,2011


2010(Restated)Net Income available to common shareholders

$
1,688,831


$
(84,183)Add : Deemed Preferred Stock Dividend


-



(350,000)Net income available to common shareholders plus assumed conversions

$
1,688,831


$
(434,183)Weighted average shares of common stock outstanding


196,336,084



109,193,511Diluted effect of warrants, options, and preferred stock


20,509,522



35,767,494Weighted average shares of common stock – diluted


216,845,606



144,961,005Earnings per share – basic

$
0.01


$
0.00Earnings per share – diluted

$
0.01


$
0.00





The warrants that were issued by Organic Region in April 2008 were assumed by the Company in connection with the reverse acquisition, and are reflected as 2,768,365 shares in the number of diluted shares for the three months ended March 31, 2011.





Pursuant to purchase agreements, in August 3, 2009, the Company issued warrants to purchase 10,145,454 shares of common stock at an exercise price of $0.11 per share and warrants to purchase 3,466,666 at an exercise price of $0.15 per share.  The warrants are exercisable through August 3, 2011.





On December 4, 2010, the Company repurchased and cancelled outstanding warrants to purchase an aggregate of 18,175,757 shares of common stock for a total consideration of $363,515 pursuant to warrant purchase agreements dated November 30, 2010 with the warrant holders.  The warrants had an average exercise price of $0.13 per share and expire from August 2011 to July 2012.





Pursuant to a purchase agreement dated on August 7, 2009, the Company , for a total consideration of $1,000,000 (i) issued an aggregate of 1,000,000 shares of series A preferred stock, (ii) issued five-year warrants to purchase 10,000,000 shares of common stock at an exercise price of $0.14 per share and 10,000,000 shares of common stock at an exercise price of $0.25 per share, and (iii) granted the investors an option to purchase up to 1,000,000 additional shares of series A preferred stock at a purchase price of $1.00 per share of series A preferred stock.





9





The preferred stock had a dilutive effect of 14,311,987 shares and 22,220,160 shares for the three months period ended March 31, 2011 and 2010. The warrants with $0.14 exercise price and $0.25 exercise price had a dilutive effect of 3,429,171 shares and 4,405,503 shares respectively for the three months period ended March 31, 2011 and 2010, respectively. The preferred stock option had no dilutive effect, for the outstanding options to purchase 350,000 shares of Series A Preferred Stock at an exercise price of $1.00 per share of Series A Preferred Stock were exercised on January 5, 2010.





Foreign currency translation





The Company uses the United States dollar for financial reporting purposes and the United States dollar is the functional currency of the Company. The Company’s subsidiaries maintain their books and records in their functional currency - Chinese Yuan Renminbi (RMB), being the primary currency of the economic environment in which their operations are conducted. All assets and liabilities are translated at the current exchange rate, stockholder’s equity is translated at the historical rates and income statement and statement of cash flows items are translated at the average exchange rate for the period. As a result, amounts related to assets and liabilities reported on the statement of cash flows may not necessarily agree with changes in the corresponding balances on the balance sheet. The resulting translation adjustments are reported under other comprehensive income as a component of shareholders’ equity.





Fair values of financial instruments





The Company’s financial instruments primarily consist of cash and cash equivalents, accounts receivable, other receivables, advances to suppliers, accounts payable and other payables.





As of the balance sheet dates, the estimated fair values of the financial instruments were not materially different from their carrying values as presented on the balance sheet. This is attributed to the short maturities of the instruments and that interest rates on the borrowings approximate those that would have been available for loans of similar remaining maturity and risk profile at respective balance sheet dates.





Statement of cash flows





Cash flows from the Company's operations are calculated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows may not necessarily agree with changes in the corresponding balances on the balance sheet.





Segment reporting





ASC 280 requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company.





ASC 280 has no effect on the Company’s consolidated financial statements as the Company operates in one reportable business segment.





Recent Accounting Pronouncements





In January 2011, the FASB issued ASU 2011-01 an accounting pronouncement related to receivables (“FASB ASC Topic 310”). The amendments in this update temporarily delay the effective date of the disclosures about troubled debt restructurings in ASU 2010-20 for public entities. The delay is intended to allow the board time to complete its deliberations on what constitutes a troubled debt restructuring. The effective date of the new disclosures about troubled debt restructurings for public entities and the guidance for determining what constitutes a troubled debt restructuring will then be coordinated. Currently, that guidance is anticipated to be effective for interim and annual periods ending after June 15, 2011.




Reclassifications





Certain prior year amounts have been reclassified to conform with the current year's presentation, none of which had an impact on total assets, stockholders' equity, net income, or net earnings per share.





10




3. PROPERTY AND EQUIPMENT, NET





Property and equipment consist of the following as of March 31, 2011 and December 31, 2010:





March 31,


December 31,2011


2010Building

$
6,131,163


$
5,535,558Manufacturing machinery


372,161



420,935Office equipment


96,075



110,199Motor vehicle


18,265



18,149Software


5,555



5,521Leasehold Improvement


192,104



693,630Total


6,815,323



6,778,471Less: Accumulated Depreciation


(578,201
)


(545,208
)Property and Equipment, net

$
6,237,122


$
6,238,784





Depreciation expense for the three months period ended March 31, 2011 and 2010 were $29,781 and $20,638, respectively.





4. INTANGIBLE ASSETS





As of March 31, 2011, the construction of the buildings for the Company’s proposed distribution center was completed. The two buildings are leased from an unrelated party for an 18-year and 17-year and 4-month lease terms, respectively, commencing upon completion of the building. Intangible assets represent payments made by the Company to the holder of the land use rights for the construction of the buildings in accordance with the terms of the lease.





The details of intangible assets are listed below as of March 31, 2011 and December 31, 2010:





March 31,


December2011



31, 2010Intangible assets –cost

$
19,628,019


$
9,563,549Accumulated amortization


(336,770
)


(47,817
)Net

$
19,291,249


$
9,515,732





The amortization expense was $288,649 and $0 for the three months period ended March 31, 2011 and 2010.





5. DUE TO RELATED PARTIES





Amounts due to related parties amounted to $18,065 and $120,840 as of March 31, 2011 and December 31, 2010, respectively. The Company has a balance due to one shareholder and former chief executive officer and chairman of the Company amounting to $83,486 as of December 31, 2010. The Company has a balance due to one shareholder and chief executive officer of the Company amounting to $18,065 and $37,354 as of March 31, 2011and December 31, 2010. The amounts due are interest free, unsecured and due on demand.





6. LONG-TERM PREPAYMENTS





There is no private ownership of land in the PRC. All land is owned by the government, which grants land use rights for a specified period of time. Guangzhou Greenland has entered into seventeen land lease and developing agreements with a number of farming cooperatives since 2005. The farming cooperatives are authorized to manage and plant the lands by Guangzhou Greenland who, during the term of the lease, has the priority right to purchase the agricultural products at fair market price. The agreements have terms of 25 years with various due dates. The payments for the entire 25-year term are payable, and were paid, in full at the inception of the agreements.





Guangzhou Greenland uses the straight-line method to amortize the long-term prepayments over the life of the land leases. As of March 31, 2011 and December 31, 2010, the Company has long-term prepayments (net) in the amount of $21,829,564 and $21,955,769, respectively.





11




The details of long-term prepayments are listed below as of March 31, 2011 and December 31, 2010:





March 31,


December2011


31, 2010Long-term prepayment –cost

$
25,274,569


$
25,115,165Accumulated amortization


(3,445,005
)


(3,159,396
)Net

$
21,829,564


$
21,955,769





Amortization expenses for the three months period ended March 31, 2011 and 2010 were $265,253 and $222,312.





Amortization expenses after March 31, 2011 are approximately as follows:




Remainder of 2011

$
796,6702012


1,062,2272013


1,062,2272014


1,047,0062015


1,001,345Thereafter


16,860,090Total

$
21,829,564





7. ACCOUNTS PAYABLE AND ACCRUED EXPENSES





Accounts payable and accrued expenses comprised the following as of March 31, 2011 and December 31, 2010:





March 31,


December 31,2011


2010Accounts payable

$
331,508


$
336,687Accrued payroll


35,501



203,466Accrued expenses


181,681



576,187Other payable


2,568,136



1,603,383Total

$
3,116,826


$
2,719,724





8. EQUITY TRANSACTIONS





Issuance of Shares as Compensation





Pursuant to an agreement with an independent director, the Company agreed to pay the director 12,500 shares of common stock every fiscal quarter. As of March 31, 2011, the Company had issued 50,000 shares and had accrued the value of 12,500 shares, reflecting the shares that were due to such director, but had not been issued, as of March 31, 2011. For the three months period ended March 31, 2010, $3,625 was recorded as an expense for the 12,500 shares payable to the director for that period.





On July 1, 2010, in connection with the election of two directors, pursuant to the director agreements, the Company is to issue 25,000 shares of common stock to each of these directors for each three month period of their directorship. As of March 31, 2011, the Company had issued 100,000 shares and had accrued the value of 50,000 shares, reflecting the shares that were due to such directors, but had not been issued. For the three months period ended March 31, 2011, $13,000 was recorded as an expense for 50,000 shares to be issued to the directors.





On November 5, 2010, the Company entered into an employment agreement with the chief financial officer. Pursuant to the agreement, the chief financial officer is to receive 500,000 shares of common stock, which vest in quarterly installments of 125,000 shares on each of October 15, 2010, January 15, 2011, April 15, 2011, and July 15, 2011, provided that the chief financial officer is employed by the Company on those dates, except that, in certain cases, including her death or termination of her employment without cause, the unvested shares vest immediately. As of March 31, 2011, the Company had issued 250,000 shares to the chief financial officer. For the three months period ended March 31, 2011, $26,250 was recorded as an expense for 125,000 shares issued to the chief financial officer.





On November 18, 2010, the Company entered into an employment agreement with the corporate secretary, who is not an executive officer.  Pursuant to the agreement, the corporate secretary is to receive 250,000 shares of common stock, which vest in quarterly installments of 62,500 shares on each of December 1, 2010, February 1, 2011, May 1, 2011, and August 1, 2011, provided that he is employed by the Company on those dates, except that, in certain cases, including his death or termination of his employment without cause, the unvested shares vest immediately. As of March 31, 2011, the Company had issued 125,000 shares to the corporate secretary. For the three months period ended March 31, 2011, $15,625 was recorded as an expense for 62,500 shares issued.





12




On June 21, 2010, the Company authorized the issuance of an aggregate of 7,195,000 shares of its common stock to employees and advisors for services. All the shares that were issued had vested as of March 31, 2011.  The 5,000,000 shares issuable to three senior executives were issuable in four quarterly installments provided, that in the event of the death of a senior executive or certain other terminations of employment, the unvested shares are immediately issuable.  As of March 31, 2011, 7,195,000 shares were issuable, of which 4,945,000 shares had been issued. For the three months period ended March 31, 2011, $253,500 was recorded as an expense for 1,250,000 shares vested to the three senior executives.





The total stock compensation expense for the three months period ended March 31, 2011 was $312,000,





Issuance of Shares pursuant to Financing Agreement





On January 15, 2011, the Company sold a total of 13,000,000 shares of common stock to a number of investors at $0.20 per share, for total gross proceeds of $2,600,000 pursuant to certain common stock purchase agreements dated as of January 15, 2011. In connection with the sales of common stock, the Company paid commissions of $234,000.





On January 12, 2011, one investor in the August 7, 2009 financing converted 150,000 shares of convertible preferred stock into 1,704,000 shares of Common Stock.





On January 31, 2011, the Company entered into an agreement with three persons (the “contractors”), who constructed a 25,528 square meter (approximately 275,000 square foot) building for the Company to provide the Company additional space at its distribution hub.  Pursuant to the agreement, the Company agreed to issue common stock, valued at $0.25 per share, in full payment of the verified costs incurred by the contractors to construct the building.  The Company issued 40,015,084 shares of common stock pursuant to the agreement.  The cost of the building was RMB 66,320,000, or $10,003,771 based on a current exchange ratio. None of the contractors has any relationship with the Company or its officers or directors.





On March 3, 2011, the Company issued 1,000,000 shares to executives and directors pursuant to agreements and authorizations described above.





Warrants





Weighted


AverageAverage


RemainingWarrants


Warrants


Exercise


ContractualOutstanding


Exercisable


Price


LifeOutstanding, December 31, 2010


25,115,090



25,115,090


$
0.16



3.73GrantedRepurchased and cancelledExercisedOutstanding, March 31, 2011


25,115,090



25,115,090


$
0.18



3.49





Fair Value of Financial Instruments





Fair value is determined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This topic also establishes a fair value hierarchy which requires classification based on observable and unobservable inputs when measuring fair value. The fair value hierarchy distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:





Level one — Quoted market prices in active markets for identical assets or liabilities;





Level two — Inputs other than level one inputs that are either directly or indirectly observable; and





Level three — Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.





Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each quarter.





13




Assets and liabilities measured at fair value on a recurring basis are summarized as follows:





Fair value measurement using inputs


Carrying amount atFinancial instruments

Level 1


Level 2


Level 3


3/31/2011Liabilities:Derivative instruments – Warrants
$
—

$
431,785

$
—

$
431,785Total
$
—

$
431,785

$
—

$
431,785





The fair value of warrants associated with the April 2008 debt issuance (Organic Region Warrants) that are reported as a liability was developed using the Black Scholes model using the following significant assumptions:





Organic Region WarrantsMarch31,


December 31,2011


2010Market price of common stock:

$
0.15


$
0.25Exercise price:

$
0.098


$
0.098Expected term (years):


3.36



3.6Dividend yield:


–



–Expected volatility:


61.51
%


65.22
%Risk-free interest rate:


1.50
%


1.50
%





As of March 31, 2011, none of these warrants has been exercised.





The risk-free rate of return reflects the interest rate for United States Treasury Note with similar time-to-maturity to that of the warrants.





None of the other warrants are treated as derivatives.





9. INCOME TAXES





Peoples Republic of China





The Company’s operations are conducted solely within the PRC. Under the current PRC enterprise income tax law, which became effective January 1, 2008, there is a standard enterprise income tax rate of 25%. The tax holidays that were granted under the former tax law, will continue in effect until they expire. The Company benefited with a two year income tax exemption in 2008 and 2009 and is subject to a 50% tax reduction from 2010 to 2012.





Guangzhou Greenland, which had net income from operations for the three months period ended March 31, 2011 and 2010, is exempt from income tax in accordance with PRC tax regulations as these operations are that of a variable interest entity of a self-employed individual operating in the agriculture products industry. The remaining subsidiaries subject to PRC income taxes generated an aggregate net loss for the three months period ended March 31, 2011. Accordingly, the Company has no provision for income taxes for the three months period ended March 31, 2011. The Company has net operating losses available to offset future taxable income for PRC entities of $2,590,476as of March 31, 2011.





The Company believes that it is more likely than not that these net accumulated operating losses generated in these entities will not be utilized in the future. Therefore, the Company has provided for a full valuation allowance for the deferred tax assets arising from the losses at these locations as of March 31, 2011. Accordingly, the Company has no net deferred tax assets.





United States





Sino Green Land, Inc. is incorporated in Nevada, United States and currently generates no revenue. The Company has net operating losses available to offset future taxable income for Sino Green Land, Inc. of $5,432,734 as of March 31, 2011.





The Company believes that it is more likely than not that these net accumulated operating losses generated in these entities will not be utilized in the future. Therefore, the Company has provided for a full valuation allowance for the deferred tax assets arising from the losses at these locations as of March 31, 2011. Accordingly, the Company has no net deferred tax assets.





14




Consolidated pre-tax income (loss) consists of the following:





Three months ended March 31,2011


2010U.S. operations

$
(550,578
)

$
(2,584,660
)Foreign operations


2,239,409



2,500,477$
1,688,831


$
(84,183
)





The Components of the provision for income taxes for the three months period ended March 31, 2011 and 2010 are as follows:





Three months ended March 31,2011


2010Current:Federal

$
-


$
-Foreign


-



-Deferred:Federal


(349,158
)


(106,141
)Foreign


(118,608
)


(2,152
)Change in valuation allowance


467,766



108,293$
-


$
-





The following tables reconcile the U.S. statutory rates to the Company’s effective tax rate as of March 31, 2011 and 2010:





For the three months-ended March 31, 2011

PRC


USA


TotalPretax income

$
2,239,409





$
(550,578
)




$
1,688,831Expected income tax expense (benefit)


279,926



12.5
%


(187,197
)


34.0
%


92,730Non-taxable income


(398,534
)


12.5
%


-







(398,534
)Change in derivative liability










(161,961
)


34.0
%


(161,961
)Change in valuation allowance


118,608



12.5
%


349,158



34.0
%


476,766$
-






$
-






$
-





For the three months -ended March 31, 2010

PRC


USA


TotalPretax income

$
2,500,477





$
(2,584,660
)




$
(84,183
)Expected income tax expense (benefit)


312,560



12.5
%


(878,784
)


34.0
%


(566,225
)Non-taxable income


(314,711
)


12.5
%


-







(314,711
)Change in derivative liability










772,643



34.0
%


772,643Change in valuation allowance


2,152



12.5
%


106,141



34.0
%


108,293$
-






$
-






$
-





The Components of deferred income taxes as of March 31, 2011 and 2010 are as follows:





Three months ended March 31,2011

2010Total Deferred Tax Assets

$
2,170,939


$
679,347Less: valuation allowance


(2,170,939
)


(679,347
)Net Deferred Tax Asset

$
-


$
-





The Company has cumulative undistributed earnings of approximately $20,313,523 as of March 31, 2011, is included in consolidated retained earnings and will continue to be indefinitely reinvested in international operations. Accordingly, no provision has been made for U.S. deferred taxes related to future repatriation of these earnings, nor is it practicable to estimate the amount of income taxes that would have to be provided if the Company concluded that such earnings will be remitted in the future.





10. CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS





The Company’s operations are conducted exclusively in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC, and by the general state of the PRC’s economy.





15




Operations of the Company in the PRC are subject to specific considerations and significant risks. These include risks associated with, among others, the political, economic and legal environments and foreign currency exchange. Results of operations of the company may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.





Since a significant amount of the company future revenues will be denominated in Renminbi, the existing and any future restrictions on currency exchange may limit the company’s ability to utilize revenues generated in Renminbi to fund any business activities outside China or fund expenditures denominated in foreign currencies.





Almost all of the Company’s products are sold at the Guangdong Yun Cheng Wholesale Market and the Beijing XinFadi Agricultural Products Wholesale Market, two major markets for the sale of agricultural products in their respective areas where the Company leases space to sell its produce.





No customers accounted for more than 10% of the total net revenue for the three months period ended March 31, 2011 and 2010.





The Company has long-term arrangements to purchase its produce from a limited number of farming cooperatives. If the Company is not able to purchase the produce from these farmers, in the event of a product shortage, and it is necessary for the Company to purchase from other suppliers, the costs may be greater due to this kind of short-term nature of arrangements.





One supplier accounted for 10% or more of the Company purchases during the three months ended March 31, 2011 and 2010.  This supplier accounted for 82.5% of purchases in the 2011 quarter and 81.4% of purchases in the 2010 quarter.  Accounts payable to these vendors amounted $0 on March 31, 2011.





The Company extends credit to its customers based upon its assessment of their credit worthiness and generally does not require collateral. Credit losses have not been significant.





11. COMMITMENT





Operating Leases





The Company leases various office facilities under operating leases that terminate on various dates.





In 2009, the Company entered an agreement with an unrelated party to lease the land for the Company’s proposed first building in the distribution hub in Guangzhou Yuncheng wholesale market for an 18-year term.





In 2010, the Company entered an agreement with an unrelated party to lease the land for the Company’s cold storage in Guangzhou Yuncheng wholesale market for a 20-year term.





In 2011, the Company entered an agreement with an unrelated party to lease the land for the Company’s proposed second building in the distribution hub in Guangzhou Yuncheng wholesale market for a 17-year and 4-month term.





The rent expenses after March 31, 2011 are as follows:





Remainder of 2011

$
1,895,7332012


2,531,0772013


2,533,6072014


2,533,9352015


2,529,399Thereafter


31,797,119Total

$
43,820,870





12. SUBSEQUENTS EVENTS





On May 13, 2011, the Company’s board of directors approved the issuance of 4,692,326 shares of common stock to be issued for services, valued at approximately $1,173,000, rendered and to be rendered in connection with interior construction work relating to the configuration of raw space in the Company’s new building for its distribution hub into units for the sale of different products and related plumbing services.




16




13.RESTATEMENT OF FINANCIAL STATEMENTS





On August 23, 2010, the Company concluded, after a review of the pertinent facts, that the previously issued financial statements contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2009, and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2010, September 30, June 30 and March 31, 2009, respectively, should not be relied upon due to the following:





The Company improperly allocated, for financial statement purposes, the proceeds received in connection with the April 2008 debt financing transaction and the August and December 2009 and January 2010 preferred stock financing transactions (collectively, “the financings”). The restated financial statements include the effects of properly allocating the financing proceeds between (1) the debt or preferred stock, as applicable, (2) any derivative liabilities associated with warrants for the purchase of common stock, and (3) any beneficial conversion features (“BCF”), as a component of additional paid-in capital, which allow the debt and preferred shareholders to convert their investment into the Company’s common stock on favorable terms.





·
Due to the improper allocation of proceeds on the April 2008 debt financing which resulted in an incorrect basis for the debt, the Company improperly reported the loss on debt extinguishment upon its settlement in August 2009. The debt settlement is appropriately reported in the restated annual financial statements for 2009. The settlement occurred in August 2009, and therefore does not affect the income statements presented. However, the accompanying balance sheets appropriately reflect the impact of settlement.





·
Certain warrants containing variable exercise terms associated with the financings were reported as a component of paid-in capital instead of properly reflecting them as a derivative liability at fair value, with changes in fair value reported in the income statement each period. The restated financial statements include the effects of reporting the derivative liabilities and their associated changes in value correctly.





·
A BCF was inappropriately recorded as a debt discount on the April 2008 financing in addition to being amortized over the subsequent 12 months with a charge to expense. Furthermore, separate BCFs associated with the December 2009 and January 2010 preferred stock financings were erroneously omitted due to a misallocation of proceeds for financial statement purposes. The restated financial statements include the effects of allocating financing proceeds to the applicable BCFs by recording a preferred stock discount with a credit to additional paid-in capital. The discounts were then charged immediately to retained earnings as deemed preferred stock dividends pursuant to the terms of the agreement which provide immediate conversion rights.





·
Earnings per share has been restated to include the effects of the restated financial statements





The Company’s management has determined that as a result of such accounting matters, its reported net income applicable to common shareholders was overstated by $2,935,083 for the year ended December 31, 2009.





Set forth below is a comparative presentation of the consolidated balance sheet and consolidated statements of income as of and for the three months period ended March 31, 2010 as restated and as initially reported in the Company’s annual report on Form 10- Q and as restated.




17





SINO GREEN LAND CORPORATION AND SUBSIDIARIES





For the three months ended March 31, 2010





Three months ended

March 31, 2010As Reported


As RestatedINCOME STATEMENT:General and administrative expenses


654,758



654,758Total operating expenses


1,446,938



1,446,938Operating income


2,189,061



2,189,061Other income/(expense):Loss on debt extinguishmentOther income (expense), net


(2,370
)


(2,370
)Interest expense


1,606



1,606Beneficial conversion feature expense






-Change in derivative liability






(2,272,481
)Total other income/(expense)


(765
)


(2,273,245
)Net income


2,188,297



(84,183
)Deemed preferred dividend


(644,318
)


(350,000
)Net income applicable to common shareholders


1,543,978



(434,183
)Comprehensive income:Net income


1,543,978



(84,183
)Other comprehensive loss:Foreign currency translation gain/(loss)


(3,729
)


(3,729
)Comprehensive income (loss)

$
1,540,249



(87,912
)Net income (loss) per share:Basic

$
0.01


$
0.00Diluted

$
0.01


$
0.00Weighted average number of shares outstanding Basic


109,193,511



109,193,511Diluted


144,961,005



144,961,005





As of March 31, 2010





As Reported


As Restated3/31/2010


3/31/2010BALANCE SHEET:Derivative liability




$
7,479,048Additional Paid-in Capital


11,540,555



8,763,103Retained earnings

$
16,316,527


$
11,515,931








18





ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS





The following discussion of the results of our operations and financial condition should be read in conjunction with our financial statements and the related notes, which appear elsewhere in this quarterly report. The following discussion includes forward-looking statements.





Statements in this quarterly report include “forward-looking statements.” Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may, and are likely to, differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors, including those described above and those risks discussed from time to time in this quarterly report, including the risks described under “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K for the year ended December 31, 2010, which includes restated financial statements for the years ended December 31, 2009. In addition, such statements could be affected by risks and uncertainties related to the effects of our restatement of our financial statements, weather and natural disasters, our ability to conduct business in the PRC, product demand, including the demand for fruit and vegetable products, our ability to develop and maintain good relations with local cooperative suppliers, our ability to raise any financing which we may require for our operations, including financing for our green produce hub, competition, government regulations and requirements, pricing and development difficulties, our ability to make acquisitions and successfully integrate those acquisitions with our business, as well as general industry and market conditions and growth rates, and general economic conditions. Any forward-looking statements speak only as of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this quarterly report.





Overview





We are engaged in the wholesale distribution, marketing and sales of premium fruits in China. Our main products include Fuji apples, emperor bananas and tangerine oranges. We purchase our products directly from farming cooperative groups to whom we provide varying degrees of farming, harvesting and marketing services. Almost all of our products are sold by us at the Guangdong Yun Cheng wholesale market and the Beijing XinFadi agricultural products wholesale market, two major markets for the sale of agricultural products in their respective areas, where we lease space to sell our produce. We sell to trading agents who sell our products to customers in and around the provinces in which the produce is grown.





Fruits, such as apples, bananas and oranges, as well as vegetables are considered staples in the Chinese diet, similar to rice and meat, and historically, demand for these products has not fluctuated with the ups and downs of the general economy. As a result, we have not yet seen a significant decline in our business from the recent economic downturn and the global credit crisis. However, if economic conditions further deteriorate, including business layoffs, downsizing, industry slowdowns and other similar factors that affect our distributors, customers, suppliers, farmers and creditors, we could see a reduction in the demand for our products which could have a material adverse effect on our business operations. Since we promote our products as premium foods, in troubled economic times, consumers may purchase cheaper fruits and vegetables rather than our products, which could affect both our revenue and our gross margin.





All fruits and vegetables are perishable, and are subject to spoilage if they are not delivered to market in a timely manner. Our ability to both purchase and sell produce is dependent upon a number of factors which are not under our control. Severe weather conditions and natural disasters, such as floods, droughts, frosts, earthquakes or pestilence, may affect our ability both to purchase products and to sell our products at the wholesale markets. Under these conditions, we may incur a higher cost of cold storage with no assurance that, even in the best conditions, spoilage cannot be avoided.





Since weather conditions are not uniform throughout China, our competitive position may be impaired if our competitors are able to deliver produce to market at a time when we are not able to make deliveries, either because we are unable to purchase the produce or because we are unable to bring the produce to market.





19




Agricultural products generally are subject to disease, blight and infestation by insects. Our revenue during 2009 was affected by a fruit insect disease which affected sales of our tangerine oranges. Any disease, blight or infestation that affects our produce could materially impair our ability to generate revenue from the affected fruit.





We only have long-term arrangements to purchase produce from five farming cooperatives. If we are not able to purchase our produce from these farmers, whether because of a shortage, because of government regulations or otherwise, we may be unable to purchase produce from other co-ops or farmers, and if we are able to purchase produce, our costs may be greater, which could impair our gross margins.





Substantially all of our produce is grown by farming cooperatives on land which we lease pursuant to 25-year lease and development agreements which we entered into during the period from 2005 to 2011. All of these leases were entered into with the farmers who held the land use rights from the government. The farming cooperatives consist of many farmers who held the land use rights. Pursuant to these agreements, as of March 31, 2011, we had paid a total of $25.3 million to the holders of the land use rights, who are not affiliated with us, and the farmers agreed to manage the land and plant the crops and we received a priority right to purchase the crops at fair market price. The farming cooperatives do not pay us rent for the land. We amortize our up-front lease payments over the life of the leases. The amortization of our lease payments is included in cost of goods sold.





We are in the process of completing our new hub for the sale of green foods in the Guangdong wholesale market. The exterior construction on two buildings, with approximately 600,000 square feet of space, has been completed and we need to construct and equip the interior. We also completed the construction on a cold storage facility to be used for apple storage.  As of March 31, 2011, we had paid approximately $16.6 million in connection with the construction of this hub from cash generated by our operations and from the sale of our equity securities, we issued 40,015,084 shares of common stock as payment for the construction of one of the buildings for our proposed distribution hub which had a cost of approximately $10.0 million.  We anticipate that we will be able to complete the construction of the hub and begin the operations of our new green foods product line in late 2011. We anticipate that the total investment to launch this business will be $32.4 million, which includes construction costs of approximately $27.4 million, with approximately $3 million auxiliary facilities, such as refrigerated cold-storage trucking capabilities and air conditioning, and $2 million for initial inventory of new green foods products.  On an ongoing basis, we believe that we will need to maintain inventory in the range of $4 million.





As part of our green foods distribution hub business, we may market our green foods directly to supermarkets and other retail stores. We anticipate that some of the retail markets will purchase our green food products at our distribution hub while others will require us to deliver the foods to them. In order to develop this business, we will need to expand our marketing effort and establish a delivery system for the retail food.





We will require significant additional funding for our green foods distribution hub business. We have no commitments for the funding and our failure to obtain funding will impair our ability to develop this business. If we are not able to operate the green foods hub, we may not be able to recover our costs, in which event we would include a charge equal to the amount of the unrecovered costs.





While we currently generate sufficient operating cash flows to support our operations, our capital requirements and the cash flow provided by future operating activities, if any, will vary greatly from quarter to quarter, depending on the volume of business during the period and payment terms with our customers. A significant portion of our revenue growth has resulted from increased land use rights which we lease under long-term leases that require us to pay the rental for the entire lease term at the inception of the lease. In the three months ended March 31, 2011, we did not lease any additional land from the farming cooperative groups.  In the same period of 2010, we expended an additional $3.3 million to purchase an additional lease. If we are to expand our business, we will need to continue to lease additional farm land on which our produce can be grown, which will require significant additional capital. To the extent that we devote resources to our proposed green foods hub, we may have to reduce the amount we spend for additional farmland, which could adversely affect the growth of our produce business.





We presently sell our produce in the wholesale markets, where our customers are wholesale distributors. In connection with, and as part of, our green foods distribution hub, we may seek to market to supermarkets and other retail outlets. To the extent that we develop this business, we would incur additional marketing, shipping and other expenses.





The current uncertainty arising out of domestic and global economic conditions, including the disruption in credit markets, may affect our ability to obtain either debt or equity financing which we may require in order to expand our business. Although our products are considered staples in Chinese consumers’ daily life, and, historically, demand for such staples has not fluctuated with the ups and downs of the general economy, if the current economic situation continues to deteriorate, we could see a more drastic reduction in the demand for our products. Since we are marketing our products as premium produce, consumers, in a time of economic difficulties, could purchase non-premium produce, which could have a material adverse effect on our business.





20





Seasonality





Our fresh fruit business is highly seasonal. Fuji apples are harvested mainly from late August until early November and are sold throughout the year. Tangerine oranges are harvested in late September through late November with the result that we have nominal sales of tangerine oranges in the third quarter of the year. Emperor bananas are harvested throughout the year. They grow in an eight-month cycle, and are cultivated and harvested all year long. As harvested fruits cannot be stored at room temperature for a long time, they must be processed for sale as soon as they are harvested or stored at a cold temperature. As a result, the sales volume for our produce occurs during the harvesting season and for the months following the harvesting season.





We generally experience higher sales in the second half of the year. Sales in second half of 2010 accounted for approximately 56% of our revenue for 2010. If sales in the second half of the year are lower than expected, our operating results would be adversely affected, and it would have a disproportionately large impact on our annual operating results.





Because of the large number of green foods products which we plan to distribute through at our green foods distribution hub, there will be many different seasons for the different products we operate. We cannot predict at this time how the seasonality of the various products we propose to sell will affect our overall profitability.





Taxation





The PRC Enterprise Income Tax Law (EIT) and Implementing Rules impose a unified EIT rate of 25.0% on all domestic-invested enterprises and foreign-invested enterprises, or FIEs, unless they qualify under certain limited exceptions. The law gives the FIEs established before March 16, 2007, such as our subsidiaries Zhuhai Organic and Guangzhou Organic, a five-year grandfather period during which they can continue to enjoy their existing preferential tax treatment. During this five-year grandfather period, the old FIEs which enjoyed tax rates lower than 25% under the original EIT law shall gradually increase their EIT rate by 2% per year until the tax rate reaches 25%. In addition, the FIEs that are eligible for a full exemption and 50% reduction under the original law are allowed to retain their preferential treatment until these holidays expire.





Under the current income tax laws and the related implementing rules, FIEs engaging in agriculture businesses, such as Guangzhou Organic, are entitled to a two-year tax exemption from PRC enterprise income tax, subject to approval from local taxation authorities. Guangzhou Organic is tax exempt for 2008 to 2009 and is entitled to a 50% tax reduction for the three years thereafter. Due to the absence of significant business in 2008, Zhuhai Organic was entitled to tax exemption in 2007, and will be entitled to a one-year tax exemption after the business resumes. However, Zhuhai Organic did not constitute a significant source of revenue or income in 2009 or 2008. Currently, pursuant to income tax law, the income tax rate for foreign-capitalized enterprises is 25% and the value-added tax rate is 13%.





Accounting Treatment of Financing Instruments





In April 2008, Organic Region, which was then a privately-owned company, issued, for $500,000, its one-year 18% convertible notes in the principal amount of $500,000 and warrants to purchase common stock after Organic Region effects a going public transaction, which includes a reverse acquisition with a publicly traded shell corporation. Due to variability in the terms of the warrants’ exercise price for which accounting rules preclude them from being considered as indexed to our common stock, the warrants are recorded at fair value, with changes in value reported in the income statement each period. Although the debt was paid off in 2009, the warrants remain outstanding.





The series A preferred stock issued in 2009 was issued with warrants and/or a conversion feature that require the proceeds received on the transaction to be allocated to each applicable component. Any resulting warrant liabilities are recorded at fair value, with changes in value recorded in the income statement each period. Any proceeds allocated to beneficial conversion features on the preferred shares are recorded as a discount on such shares, with a credit to additional paid-in capital. The discounts are then charged immediately to retained earnings as deemed preferred stock dividends pursuant to the terms of the agreement which provide immediate conversion rights.





Restatement of Financial Statements





On August 23, 2010, we concluded, after a review of the pertinent facts, that the previously issued financial statements contained in our annual report on Form 10-K for the year ended December 31, 2009 and our quarterly reports on Form 10-Q for the quarters ended March 31, 2010, September 30, 2009, June 30, 2009 and March 31, 2009 should not be relied upon for reasons set forth in Note 13 of Notes to Consolidated Financial Statements. This quarterly report reflects restated financial statements for the three months ended March 31, 2010 because of our failure to account properly for the treatment of securities issued in financings during 2009 and 2008.





21





Results of Operations





The following table sets forth information relating to our products for the three months ended March 31, 2011 and the years ended December 31, 2010 and 2009 (dollars in thousands):





Period

Product


Sales


Percentage


Cost of Sales


Gross ProfitThree Months Ended

Fuji Apples

$
35,067


85.0%

$
31,365

$
3,702March 31, 2011

Emperor Bananas


3,412


8.3%


3,004


408Tangerine Oranges


2,674


6.5%


2,369


305Vegetables


81


0.2%


58


23Total

$
41,234




$
36,796

$
4,438Year Ended December 31, 2010

Fuji Apples

$
115,995


82.8%

$
103,733

$
12,262Emperor Bananas


13,402


9.6%


11,697


1,705Tangerine Oranges


6,301


4.5%


5,556


745Jiangxi Naval Oranges*


3,815


2.7%


3,556


259Vegetables


547


0.4%


423


124Total

$
140,060




$
124,965

$
15,095Year Ended December 31, 2009

Fuji Apples

$
92,027


85.2%

$
82,258


9,769Emperor Bananas


9,872


9.1%


8,618


1,255Tangerine Oranges


5,575


5.2%


4,937


638Vegetables


572


0.5%


496


76Total

$
108,045




$
96,308

$
11,737


* During the fourth quarter of 2010, we purchased and sold Jangxi naval oranges as a test market. We purchased these oranges from third party farmers. Because of the low margin generated by these sales, we do not anticipate selling these oranges on a regular basis.





Three Months Ended March 30, 2011 and March 31, 2010





The following table sets forth the key components of our results of operations for the three months ended March 31, 2011 and 2010, in thousands of U.S. dollars and as a percentage of sales:








22





Change from ThreeThree Months Ended March 31,


Months Ended Mar 31,2011


2010


2011 to Mar 31, 2010Amount


Percent


Amount


Percent


Amount


PercentSales

$
41,234



100.0
%

$
33,556



100.0
%

$
7,678



22.9
%Cost of sales


36,796



89.2
%


29,920



89.2
%


6,876



23.0
%Gross profit


4,438



10.8
%


3,636



10.8
%


802



22.1
%Operating expenses:Selling expenses


1,027



2.5
%


792



2.4
%


235



29.6
%General and administrative expense


1,612



3.9
%


443



1.3
%


1,169



264.1
%Salary and wages


264



0.6
%


208



0.6
%


56



26.7
%Stock compensation


312



0.8
%


4



0.0
%


308



8,506.9
%Total operating expenses


3,215



7.8
%


1,447



4.3
%


1,768



122.2
%Income from operations


1,222



3.0
%


2,189



6.5
%


(966
)


(44.1
)%Other income (expenses)Interest (expense) income, net


0



0.0
%


2



0.0
%


(1
)


(75.3
)%Change in derivative liability


476



1.2
%


(2,272)



(6.8
)%


2,749



(121.0
)%Other, net


(11)



(0.0
)%


(2)



(0.0
)%


(8
)


356.9
%Total other income (expense)


466



1.1
%


(2,273)



(6.8
)%


2,739



(120.5
)%Net income1


1,689



4.1
%


(84)



(0.3
)%


1,773



(2,106.1
)%Deemed preferred stock dividend


-







(350)



(1.0
)%


350



(100
)%Net income available to common shareholders


1,689



4.1
%


(434)



(1.3
)%


2,123



(489.0
)%Comprehensive income:Net income1


1,689



4.1
%


(84)



(0.3
)%


1,773



(2,106.1
)%Foreign currency translation gain (loss)


280



0.7
%


(4)



(0.0
)%


284



(7,622.1
)%Comprehensive income


1,969



4.8
%


(88)



(0.3
)%


2,057



(2,340.1
)%  1
Pursuant to the tax laws of the PRC, no income tax was due with respect to the three months ended March 31, 2011 or 2010.  If income tax were payable at the statutory rate, the net income available to common shareholders would have been $0.9 million for the three months ended March 31, 2011 and ($1.1) million for the three months ended March 31, 2010.





2
The percentages were not included since they do not provide meaningful information.





Sales. Sales increased approximately $7.7 million, or 22.9%, to approximately $41.2 million in the three months ended March 31, 2011 from approximately $33.6 million in the three months ended March 31, 2010.  Sales of our Fuji apples increased 24.2% in the three months ended March31, 2011 as compared to the three months ended March 31, 2010 despite the volume decrease of Fuji apples in the 2011 period.  Our sales volume decreased by an aggregate of 1,636 tons in the three months ended March 31, 2011 as compared to the three months ended March 31, 2010.  Lower apple volume in the 2011 periods was driven by the lower crop as a result of 2010 freeze weather in the Shannxi apple plantations.  However, the higher apple sales price was more than offset the volume decline in 2011.  Sales of our emperor bananas decreased by 0.6% in the three months ended March 31, 2011 as compared with the three months ended March 31, 2010 as a result of the lower sales price of the emperor bananas.





23





Cost of Sales. Our cost of sales is primarily comprised of the cost of purchasing produce from the farming cooperatives plus amortization of land use rights, Our cost of sales increased approximately $6.9 million, or 23.0%, to approximately $36.8 million in the three months ended March 31, 2011 from approximately $29.9 million in the three months ended March 31, 2010, reflecting increase of purchase price of Fuji apples during the first quarter of 2011.  The increase is the cost of Fuji apples paralleled the increase in the selling price of the apples.





Gross Profit and Gross Margin.Our gross profit increased 22.1%, from $3.6 million in the quarter ended March 31, 2010 to $4.4 million for the quarter ended March 31, 2011. Our gross margin stayed the same at 10.8% in the three months ended March 31, 2010 compared to the same period last year.





Selling Expenses. Our selling expenses are comprised of marketing expense, the salaries of our marketing staff, bonus, rent and other selling expenses. These expenses increased approximately $0.2 million, or 29.6%. As a percentage of sales, selling expenses increased to 2.5% in the three months ended March 31, 2011 from 2.4% in the three months ended March 31, 2010.





General and Administrative Expenses. Our general and administrative expenses are comprised of travel expense, office expense, product development expense, market research expense, exhibition expense, audit expense, advisory expense and other expenses associated with our status as a public company. These expenses increased by approximately $1.2 million, or 264.1%, to approximately $1.6 million in the three months ended March 31, 2011 from approximately $0.4 million in the three months ended March 31, 2010. As a percentage of sales, administrative expenses increased to 3.9% in the three months ended March 31, 2011 as compared to 1.3% in the three months ended March 31, 2010 due to increases in rent expenses for the land used for the construction of the Metro Green buildings and cold storage facilities and the amortization costs for the leasehold improvements.





Salary and Wages. Our salary and wages expenses increased by approximately $55,559, or 26.7%, to approximately $0.26 million in the three months ended March 31, 2011 from approximately $0.21 million in the three months ended March 31, 2010. As a percentage of sales, salary and wages expenses stayed at 0.6% in the three months ended March 31, 2011 as compared to the same period in 2010.





Stock Compensation. Stock compensation represents the shares of common stock issued to employees and consultants. We incurred $312,000 stock compensation for the three months ended March 31, 2011 compared to $3,625 stock compensation for the three months ended March 31, 2010 represents the fair value of the shares that were issued or became issuable in the quarter.





Interest Expense.  Interest income was $396 in the three months ended March 31, 2011 compared $1,606 in the same period of 2010.





Change in derivative liability.   Change in derivative liability reflects a change in the value of derivative securities that were outstanding during the period.  Our only derivative security during these periods are warrants which include a provision for a change in the exercise price of the warrant if we sell common stock at a price which is less than the exercise price of the warrants.  We generated income from the change in derivative liability of $476,356 in the three months ended March 31, 2011 period compared to expense of $2,272,481 for the comparable period of 2010.  The change in fair value, as computed using the Black-Scholes option pricing model, primarily reflected the change in our stock price, which was $0.16 per share at March 31, 2011 and $0.35 per share at March 31, 2010. In April 2008, Organic Region, which was then a privately-owned company, issued, for $500,000, its one-year 18% convertible notes in the principal amount of $500,000 and warrants to purchase common stock after Organic Region effects a going public transaction, which includes a reverse acquisition with a publicly traded shell corporation. Due to variability in the terms of the warrants’ exercise price for which accounting rules preclude them from being considered as indexed to our common stock, the warrants are recorded at fair value, with changes in value reported in the income statement each period. Although the debt was paid off in 2009, the warrants remain outstanding.




24





Tax. Since our operating subsidiaries benefited from a tax exemption for agriculture products for 2011 and 2010, we did not incur any income tax liability in 2011 or 2010. Almost all of our income is generated by a variable interest entity owed by Mr. Xiong Luo, our chief executive officer and president, whose financial statements are consolidated with ours pursuant to FIN 46R. If the tax exemption were not in effect and we paid taxes at the statutory rate, our income tax expense would have been $0.8 million and $0.6 million for the first quarter of 2011 and 2010, and the net effect on earnings per share would have been $0.00 per share (basic and diluted) for the three months ended March 31, 2011, $0.01 per share (basic) and $0.00 per share (diluted) for the three months ended March 31, 2010.





Deemed Preferred Stock Dividend.As a result of the terms of the series A preferred stock that we issued in the first quarter of 2010 period, we generated a $350,000 deemed preferred stock dividend, reflecting the amount by which the market price of the underlying common stock on the date of exercise and the purchase price of the common stock issuable upon conversion of the series A preferred stock on an “as if converted” basis.  We did not have any comparable item in the first quarter of 2011.





Net Income Available to Common Shareholders. As a result of the deemed preferred stock dividend, our net income applicable to common stockholders was $1.7 million, or $0.01 per share (basic and diluted) for the March 2011 period, as compared with a loss of $0.4 million, or ($0.00) per share (basic and diluted) for the same period of 2010.





Liquidity and Capital Resources





At March 31, 2011, we had a working capital deficiency of approximately $1.9 million, as compared with a working capital deficiency of approximately $2.9 million at December 31, 2010.  Our working capital reflects higher accounts payable and accrued expenses in 2011.  The following table sets forth information as to the principal changes in the components of our working capital (dollars in thousands).











25








Category







December 31, 2010 to

March 31, 2011March 31,

2011


December 31,

2010

Change


Percent

ChangeCurrent Assets:Cash and cash equivalents

$
958


$
925


$
33



3.5%Accounts receivable, net


245



261



(16)



(6.3)%Inventories


54



9



45



521.5%Advances – current portion


773







773


NMOther current assets


221



114



107



94.0%Total current assets


2,251



1,309



942



71.9%Current Liabilities:Accounts payable and accrued expenses


3,117



2,720



397



14.6%Advances from customers


-



15



(15)



(100)%Due to related parties


18



121



(103)



(85.1)%Shares to be issued as stock compensation


486



385



101



26.4%Shares to be issued


70



70



-



0.0%Derivative liability


432



908



(476)



(52.5)%Total current liabilities


4,123



4,219



(96)



(2.3)%Net working capital deficiency


(1,872)



(2,910)



1,037



(35.7)%





In the March 2011 period, we generated $1.6 million in our operations, as compared with cash flow used in operations of $1.4 million in the same period of 2010.  Our cash flow generated in operations for 2011 reflected improved other payables and zero cash expenditures for advances for our Metro Green distribution hub, which we are leasing from a non-affiliated party.  For 2011, cash used in operations included approximately $0.5 million change in derivative liability.  For 2010, the long-term lease obligation payments were $3.3 million.  Since these payments are reflected in our cash flow from operations for 2011 and 2010, our operations generated $1.6 million in 2011 and used $1.4 million in 2010.





Cash flow used in investing activities was approximately $3.8 million in 2011, as compared with cash flow used in investing activities for 2010 of $1,520.  The principal investing activity in 2011 was acquisition of intangible assets.  Cash funds used in investing activities was for additional property and equipment for 2010.   For 2011, our cash flow from financing activities was $2.2 million, compared with cash generated in financing activities of $1.1 million in 2010, reflecting $2.4 million net from the sale of common shares.








26





Our primary source of funds, other than operations, was the sale of our equity securities, from which we received $2.6 million (gross) in the three months ended March 31, 2011.





On January 15, 2011, we sold a total of 13,000,000 shares of common stock to a number of eight investors at $0.20 per share, for total gross proceeds of $2,600,000 pursuant to certain common stock purchase agreements dated as of January 15, 2011.





In connection with the sales of common stock, the Company paid $234,000 in commissions.





On January 31, 2011, we entered into an agreement with three contractors, who constructed a 25,528 square meter (approximately 275,000 square foot) building for the Company to provide the Company additional space at its distribution hub.  Pursuant to the agreement, the Company agreed to issue common stock, valued at $0.25 per share, in full payment of the verified costs incurred by the contractors to construct the building.  The Company agreed to issue 40,015,084 shares of common stock.  The cost of the building was RMB 66,320,000, or $10,003,771 based on a current exchange ratio. None of the contractors has any relationship with the Company or its officers or directors.





We believe that our cash flow from operations will provide us with sufficient funds to enable us to continue our basic operations, including the purchase of additional land use rights for growing our produce. In the past, we have leased farmland for periods of 25 years on terms which required us to make all of the lease payments at the inception of the lease, which has required us to make significant cash outlays in the past.  These payments were approximately $0 in the 2010 and $3.3 million for 2010 and the funding for these leases was generated from our operations.





We anticipate that we will be able to complete the construction of the hub and begin the operations of our new green foods product line in late 2011. We anticipate that the total investment to launch this business will be $32.4 million, which includes construction costs of approximately $27.4 million, with approximately $3 million auxiliary facilities, such as refrigerated cold-storage trucking capabilities and air conditioning, and $2 million for initial inventory of new green foods products.  On an ongoing basis, we believe that we will need to maintain inventory in the range of $4 million.





We will need to raise a substantial amount of capital from equity or debt markets, or to borrow funds from local banks, in order to complete the construction of our hub, launch and operate our new green foods business and maintain inventory.  However, there is no assurance that, if required, we will be able to raise additional capital or reduce discretionary spending to provide the required capital.  Currently, the capital markets for small capitalization companies are difficult and banking institutions have become stringent in their lending requirements.





Accordingly, we cannot be sure of the availability or terms of any third party financing, and any financing that may be available may be on terms which are not favorable to us and our stockholders and may result in significant dilution to our stockholders.  In addition, if our outstanding warrants are not exercised, the presence of such a large number of warrants combined with the lack of an active trading market in our stock and our need to restate our financial statements and our filing of a Form 8-K stating that you cannot rely on our previously issued financial statements may impair both our ability to raise capital in the equity markets and the terms on which any funds could be made available to us.  Although we are seeking equity and debt financings to provide us with the funds we require to construct and operate our green foods distribution hub, as of the date of this annual report, we do not have any formal or informal agreement or understanding with respect to any transaction which would provide us with the necessary cash.  The failure to obtain funding when required could significantly impair our ability to develop this business.





To the extent that we are able to generate funds from the sale of our equity and debt securities, our first priority is the completion and operation of the green foods distribution hubs.  To the extent that we develop operations directed to sales to retail operations, these operations will be included as a phase of the green foods distribution hub.  We do not currently plan to develop independent operations directed to the retail market. To the extent that we are not able to generate funds from the sale of debt or equity securities, we will limit the expansion of our fruit business to land which we can purchase from our cash flow from operations.





Critical Accounting Policies and Estimates





The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operation. Critical accounting policies are those that are most important to the portrayal of our financial conditions and results of operations and require management’s difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments.





27




We believe the following critical accounting policies involve the most significant estimates and judgments used in the preparation of our financial statements.





Accounts Receivable – Our policy is to maintain reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves.





Inventories – Inventories are valued at the lower of cost (determined on a weighted average basis) or market value. Management compares the cost of inventories with market value and an allowance is provided to reduce the value of inventories to their net market value.





Impairment – We apply the provisions of ASC 360-10 (Originally issued as FAS No. 144). ASC 360-10 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value. We test long-lived assets, including property, plant and equipment and intangible assets subject to periodic amortization, for recoverability at least annually or more frequently upon the occurrence of an event or when circumstances indicate that the net carrying amount is greater than its fair value. Assets are grouped and evaluated at the lowest level for their identifiable cash flows that are largely independent of the cash flows of other groups of assets. We consider historical performance and future estimated results in our evaluation of potential impairment, and then we compare the carrying amount of the asset to the future estimated cash flows expected to result from the use of the asset. If the carrying amount of the asset exceeds estimated expected undiscounted future cash flows, we measure the amount of impairment by comparing the carrying amount of the asset to its fair value. The estimation of fair value is generally measured by discounting expected future cash flows as the rate we utilize to evaluate potential investments. We estimate fair value based on the information available in making whatever estimates, judgments and projections are considered necessary.





Revenue Recognition – Our revenue recognition policies are in compliance with ASC 605 (originally issued as Staff Accounting Bulletin (SAB) 104). Sales revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations exist and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue. Revenues from the sale of products are recognized at the point of sale of our products. Discounts provided to customers by us at the time of sale are recognized as a reduction in sales as the products are sold. Discounts provided by vendors are not recognized as a reduction in sales provided the coupons are redeemable at any retailer that accepts coupons. Sales taxes are not recorded as a component of sales. The “Cost of Good Sold” line item of the Consolidated Statements of Income includes product costs, net of discounts and allowances. Discounts provided to us by vendors at the time of purchase are recognized as a reduction in inventory cost as the products are delivered. All other costs, including warehousing costs, transportation costs; salaries, rent expense and depreciation expense, are shown separately in selling expenses or general and administrative expense in our consolidated statements of income.





Foreign Currency Translation – We use United States dollars for financial reporting purposes. Our subsidiaries maintain their books and records in their functional currency - RMB, which is currency of China, where all of our operations are conducted. Such financial statements were translated into United States dollars in accordance with ASC 830 (originally issued as Statement of Financial Accounts Standards (“SFAS”) No. 52, “Foreign Currency Translation”). According to the Statement, all assets and liabilities are translated at the current exchange rate on the balance sheet date, stockholder’s equity are translated at the historical rates and income statement items are translated at the average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with ASC 220 (Originally issued as SFAS No. 130, “Reporting Comprehensive Income”) as a component of stockholders’ equity.





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Derivative Liability – The derivative liability represents the value of warrants to purchase common stock that were issued in connection with certain debt and warrants that were issued in 2008 and preferred stock and warrants that were sold in 2009. According to the guidance provided in FASB ASC 815-40-15-5 through 815-40-15-8, we accounted for the value of these warrants as derivative liabilities. The warrants are reported at fair value using the Black-Scholes model.  Changes in the value of the warrants are reflected in earnings for the period as a change in derivative liability.  The holders of the warrants that included the provisions which gave rise to the derivative liability waived those rights in September 2010.





New Accounting Pronouncements





In January 2011, the FASB issued ASU 2011-01 an accounting pronouncement related to receivables (“FASB ASC Topic 310”). The amendments in this update temporarily delay the effective date of the disclosures about troubled debt restructurings in ASU 2010-20 for public entities. The delay is intended to allow the board time to complete its deliberations on what constitutes a troubled debt restructuring. The effective date of the new disclosures about troubled debt restructurings for public entities and the guidance for determining what constitutes a troubled debt restructuring will then be coordinated. Currently, that guidance is anticipated to be effective for interim and annual periods ending after June 15, 2011.




Off Balance Sheet Arrangements





We do not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity or capital expenditures or capital resources that is material to an investor in our securities.





ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.





Not Applicable.





ITEM 4.
CONTROLS AND PROCEDURES.





Evaluation of Disclosure Controls and Procedures.





The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including to our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.





As required by Rule 13a-15 and Rule 15d-15 under the Exchange Act, our management, including our chief executive officer and our chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2011. Our management, under the direction of our chief executive officer and our chief financial officer, concluded that as of March 31, 2011, our disclosure controls and procedures were effective.





Changes in Internal Control over Financial Reporting.





During the quarter ended March 31, 2011, there were no changes in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.





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PART II





OTHER INFORMATION





ITEM 6.
EXHIBITS.31.1
Certification of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes- Oxley Act of 2002.31.2
Certification of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
Certification of Principal Executive Officer and Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.











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SIGNATURES





Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.





SINO GREEN LAND CORPORATIONDate: May 13, 2011
By:
/s/ Xiong LuoXiong Luo, Chief Executive Officer(Principal Executive Officer)Date: May 13, 2011
By:
/s/ Huasong Sheena ShenHuasong Sheena Shen, Chief Financial Officer(Principal Financial Officer and Principal Accounting Officer)














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